New York Markets After Hours

US Stocks Push Higher, Led By Bank Shares

JonathanCheng

Soaring bank shares led the broader stock market higher Tuesday as Bank of America raised hopes it will increase dividends and share buybacks.

The Dow Jones Industrial Average jumped 140 points, or 1.2%, to 12232, while the Standard & Poor's 500-stock index added 13 points to 1323 and the Nasdaq Composite gained 24 points to 2770.

The Dow's strong gains pushed the blue-chip index back to where it started the month, and recovered almost all of the previous two days' losses of 168 points. The S&P 500 and Nasdaq indexes are still down for the month of March.

Leading the gains on Tuesday were financial stocks, including Dow components Bank of America, up 4.5%; American Express, up 3.8%; and J.P. Morgan Chase, up 2.9%. PNC Financial Services Group soared 4.3%, Citigroup added 2.4%, Wells Fargo gained 2.2%, and Goldman Sachs Group increased 1.4%.

Bank of America's gains came after Chief Executive Brian Moynihan said he believes the bank has the ability to earn between $35 billion and $40 billion a year in pretax earnings when the business normalizes. Speaking at the bank's first investor-day conference since 2007, Moynihan said the bank has no intention of making more acquisitions and will instead look to cut costs and focus on customers.

Moynihan said the bank was focused on returning "every dollar" in capital to shareholders, through regular dividends, share buybacks and special cash dividends.

"It's just a prime time to be in banking--with such a steep yield curve, that's designed to drive profits to banks, allowing banks to borrow cheaply and lend higher," said Mickey Cargile, managing partner of WNB Private Client Services in Midland, Texas. Investor concerns over regulatory restraints on the banking sector was "overdone."

"There has been quite a bit of attention paid to the bad side of banking without really paying attention to the facts--banks can make bigger spreads than they normally do," he said.

Not everyone was convinced by banks' prospects.

"In an economy that's still in a deleveraging mode, I really view the commercial-banking sector as one that essentially has no organic growth prospects," said Howard Ward, chief investment officer of growth equities at Gamco. "They can take market share from one another, but it's an industry facing no growth and a lot of regulations that haven't been sorted out yet."

Weighing on the market was McDonald's, off 1.2%, after the fast-food chain reported that same-store sales rose by a better-than-expected 3.9% in February, though results in its U.S. restaurants missed Wall Street's expectations.

Energy stocks were also weak, as crude prices fell in volatile trading. Reports that more countries may step in to boost production and that Libya's Col. Moammar Gadhafi may be looking for a way to step down helped cheer the market, pushing crude oil to an intraday low of $103.33 a barrel. But as forces loyal to Gadhafi launched a new round of attacks on rebel positions, crude oil retraced some of its declines. Crude oil for April delivery finished at $105.02, off 0.4%.

Even so, concerns across the volatile Middle East and North Africa region continued to weigh on investors' minds. Ward, of Gamco, said he was worried about a scheduled "day of rage" protest on Friday in Saudi Arabia. "I don't see how it goes smoothly," he said. "Protests there are against the law, and if that happens, I don't see how that does not support higher oil prices." He was also concerned about Libya, warning that even the removal of Gadhafi could leave a fractured country with different parts of the oil infrastructure split between the separate tribes.

The economic calendar was fairly quiet Tuesday, though a survey of small businesses showed more firms are planning to raise their selling prices and increase hiring.

Among companies in focus, Urban Outfitters dropped 17% to make it the worst performer among the S&P 500 companies. The retailer reported fourth-quarter sales and profit that were below market expectations.

Home builder PulteGroup surged 8.3% to lead the S&P 500 after it said it signed 2,674 contracts in January and February, up from 2,415 a year earlier.

Sprint Nextel gained 5% after reports that the telecom operator is in talks with Deutsche Telekom over a purchase of the German company's T-Mobile USA cellphone unit. In return, Bloomberg News reported, the German company would take a stake in the combined telecom giant. Deutsche Telekom gained 4%. Telecoms were generally strong, with AT&T gaining 2.3% and Verizon Communications adding 1.4%.

Boeing rose 2% after striking a preliminary deal to sell 38 wide-body jets to Hong Kong Airlines and also signing a deal to supply five 747-8 aircraft to Chinese flag carrier Air China Ltd. U.S.-listed shares in Air China added 5.2%.

Convenience-store operator Casey's General Stores fell 8.2%. It reported earnings for the latest quarter that fell short of expectations.

Dick's Sporting Goods gained 5.9% after fourth-quarter earnings rose 30% as the company opened new stores. Sales at stores open at least a year surged, exceeding analysts' expectations.

Brown-Forman added 3.3% after third-quarter earnings jumped by a better-than-expected 30%, thanks to a strong performance from its whiskey and tequila brands. Brown-Forman, the maker of Jack Daniel's and Southern Comfort, also reported signs of a rebound in its struggling U.S. market, beating revenue expectations and raising its earnings forecast.

Netflix fell 5.6% after Warner Bros. said it would begin offering select movies through Facebook, a move that will enable the social-networking giant to compete in the online movie-rental market.

Treasurys fell, pushing the yield on the benchmark 10-year note higher, to 3.55%. Gold traded flat, while the dollar climbed against the yen and the euro, which fell 0.5% to $1.3899.

European stocks finished slightly higher, with the Stoxx Europe 600 up 0.4%, while in Asia stocks also closed mostly higher.

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